British Average Earnings Index, released each month, is a leading of consumer inflation. A reading which is higher than the market forecast is bullish for the pound.
Here are all the details, and 5 possible outcomes for GBP/USD.
Published on Wednesday at 8:30 GMT.
Indicator Background
The Average Earnings Index is closely watched by analysts, and as a key indicator, an unexpected reading can have a significant effect on the movement of GBP/USD.
The indicator softened in June, posting a gain 2.4%, compared with 3.2% a month earlier. Little change is expected in the July report, with an estimate of 2.5%.
Sentiments and levels
The pound has had an awful few weeks, but reversed directions last week and posted a strong rally against the greenback. Will the Fed press the rate trigger this week? Even if the Fed plays it safe and doesn’t make a move, hawkish talk from Yellen could bolster the greenback against the pound. Thus, the overall sentiment is neutral on GBP/USD towards this release.
Technical levels, from top to bottom: 1.5682, 1.5590, 1.5485, 1.5341, 1.5269, and 1.5163.
5 Scenarios
- Within expectations: 2.2% to 2.8%. In this scenario, GBP/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
- Above expectations: 2.9% to 3.3%: A stronger reading than predicted could push the pair above one resistance line.
- Well above expectations: Above 3.3%: An unexpectedly sharp rise could push GBP/USD upwards, with a second line of resistance at risk.
- Below expectations: 1.7% to 2.1%: A lower than expected reading could pull the pair downwards, with one support level at risk.
- Well below expectations: Below 1.7%: In this scenario, the pair could break below a second support level.
For more on the pound, see the GBP/USD.
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